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Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We

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Speaker 1: will have a news conference with President dr Ky his

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Speaker 1: final one. Wow, eight years is up. Where has that

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Speaker 1: time gone? Let's talk about this market? Shaw We three am,

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Speaker 1: cutting forecast, CAT cutting forecast, Texas instruments, cutting forecasts, the

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Speaker 1: market getting a ton thrown at it and it's holding

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Speaker 1: up really well to discuss. Kate more black Rock Global

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Speaker 1: Allocation Investment teamhead of Thematic Strategy. Good monitor, Kate, good morning.

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Speaker 1: Sometimes the information content in how a market response to

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Speaker 1: data can be just as important as the data it's self.

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Speaker 1: That's right. The last couple of days, did they speak

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Speaker 1: to that? Yeah? I think that's right. So there's there's

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Speaker 1: one way to think about investing, which is it's not

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Speaker 1: good enough to have the right information or what you

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Speaker 1: perceive to be the right information. It's not good enough

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Speaker 1: even to think about or think you have a view

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Speaker 1: on what consensus thinks to write information is you also

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Speaker 1: have to get to that third degree, what does consensus

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Speaker 1: think consensus things? And I think this is what's really

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Speaker 1: critically important. Consensus thought, consensus though things were gonna get

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Speaker 1: a lot worse. And uh, we're at a place now

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Speaker 1: where maybe on some of the industrial companies we're not

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Speaker 1: seeing a meaningful pickup and activity, but this pace of

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Speaker 1: deceleration has slowed, and there are signs of life and

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Speaker 1: actually some words us like optimistic and optimism across a

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Speaker 1: number of the cyclical sectors that are leading people to

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Speaker 1: think that, you know, fourth quarter, maybe first quarter of

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Speaker 1: are going to be the cyclical low. And I think

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Speaker 1: that's leading these people who have been positioned for you know,

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Speaker 1: a prolonged slowdown, perhaps even a recession, to take to

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Speaker 1: take on some of these cyclical companies. Again, well, let's

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Speaker 1: take this morning as an example. Eurostocks holding up really

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Speaker 1: quite well even after another round of disappointing p M

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Speaker 1: I S. A lot of people might be saying, we've

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Speaker 1: seen the worst of it. Are you confident we have now?

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Speaker 1: And the eurostox is a great example actually because if

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Speaker 1: you think about this, the back the macro backdrop is

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Speaker 1: still really weak. We have not actually gotten past that

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Speaker 1: point of decelerating growth. The fundamental story for a lot

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Speaker 1: of the European companies, particularly domestics, don't look exceptionally strong valuations.

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Speaker 1: It's hard to argue they're cheap, especially when you think

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Speaker 1: about the companies that are producing growth and the premium

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Speaker 1: they're trading to the rest of the market. But you know,

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Speaker 1: this really comes back to the sentiment where a lot

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Speaker 1: of people had not owned European stocks for a while.

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Speaker 1: We had seen consistent outflows across all European managed funds

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Speaker 1: as well as et f s, and there's a little

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Speaker 1: bit of a catch up the promise that maybe there's

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Speaker 1: some fiscal stimulus, maybe there's going to be uh, some

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Speaker 1: signs of life, and the markets outperformed. I'm not sure

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Speaker 1: that our performance is sustainable. John, what Charles Cantor said, Uh,

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Speaker 1: with new Bigger Berman. It's idiosyncratic. Now there's Twitter cratering

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Speaker 1: down off uh, you know, lowest levels in April and

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Speaker 1: off quarterly sales disappointment, etcetera, etcetera. We're all buried in

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Speaker 1: the idiosyncratic Now for mere mortal investors just trying to

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Speaker 1: make the retirement plan go up. Do you take a bigger,

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Speaker 1: broader view and just ignore the idiosyncratic. I think you've

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Speaker 1: made a good point, though, Tom, there are lots of

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Speaker 1: very specific stories, not just in this earning season, but

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Speaker 1: in terms of market leadership throughout the course of two

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Speaker 1: thousand nineteen. The good news is especially I'd say the

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Speaker 1: US large cap space has a large number of these

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Speaker 1: strong idiosyncratic stories, and that's kind of what what gives

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Speaker 1: the strength of the S ANDP. Have we ever been

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Speaker 1: more miserable John going up yere today? I don't think

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Speaker 1: the scars of q Q is still so deep cake,

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Speaker 1: and I think a lot of people are still worried

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Speaker 1: about going into twenty leveled up adding some cyclicality to

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Speaker 1: their portfolios without really seeing a bottoming out in the

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Speaker 1: economic data. Talk to me about the spread right now

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Speaker 1: between south side expectations and by side sentiment. Clearly not

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Speaker 1: a precise science, but just how you interpret that at

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Speaker 1: the moment. Yeah, I think there's a huge spread. Actually.

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Speaker 1: One of the easiest ways to gauge this is in

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Speaker 1: terms of cash levels and overall defensive positionings on the

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Speaker 1: Bye side relative to the cell side. Earnings expectations for

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Speaker 1: the twelve month forward and you know, something John and

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Speaker 1: I were just talking about was that if you look

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Speaker 1: at this week last year, expectations for earnings over the

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Speaker 1: next year, and that that cave two thousand nineteen, but

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Speaker 1: in this case or pretty much the same. This is

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Speaker 1: another way to say the Cell side hasn't significantly adjust

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Speaker 1: did their expectations yet, but the behavior on the Bye

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Speaker 1: side in rotation and holding higher cash and slightly more

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Speaker 1: defensive positioning um really doesn't square with what might have

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Speaker 1: been decent numbers for earnings that are in the south

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Speaker 1: side forecast. I think people have been scared. There's been

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Speaker 1: the geopolitics, there's policy, there's the growth data, and they're very,

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Speaker 1: very concerned that the duration of this cycle is too long.

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Speaker 1: In Black Rock, what's the percentage of people that have

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Speaker 1: enjoyed this bullmarket? Has this been the all time loneliest

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Speaker 1: up of the last one year or two years? Percentage

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Speaker 1: of people who have enjoyed it in or you know,

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Speaker 1: you know, I get the feeling it's actually pretty lonely.

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Speaker 1: There's a lot of people, because of these idiosyncratic geopolitical

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Speaker 1: corporate stories, have just said no, are they're not in

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Speaker 1: fully Yeah, they even when you are invested. I think

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Speaker 1: the anxiety level and the fear that something could really

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Speaker 1: reverse the mark it is much higher than it has

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Speaker 1: been in any of the post crisis period. You know,

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Speaker 1: that doesn't make the sleep quality of many of our

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Speaker 1: investors particularly high. Okay, what have people been buying? They've

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Speaker 1: have been rewarding the companies with structural growth tail winds.

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Speaker 1: Morgan Stanley have a take on this this week. They

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Speaker 1: say the narrative of slowing growth has become obvious. The

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Speaker 1: market has been rewarding companies with structural growth tail winds,

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Speaker 1: betting they could grow through a slowdown. This has created

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Speaker 1: valuation risks, and the valuation risks around say the software companies,

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Speaker 1: et cetera. Where do you stand on the area of

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Speaker 1: the market right now? Yeah, Look, there are some pockets

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Speaker 1: of the market. Software is an obvious example where valuations

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Speaker 1: had become quite extended. Uh, and we're actually revenue revenue

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Speaker 1: growth was not going to really come through, uh, not

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Speaker 1: even just at the back end of but the chances

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Speaker 1: of it coming through were down as well. This is

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Speaker 1: what I will say, though, UM, I think the call

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Speaker 1: to rotate out of the more UH secular growth stories

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Speaker 1: is far too soon in order to get very value

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Speaker 1: oriented place, and this the sort of cyclical losers. To outperform,

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Speaker 1: you need an acceleration in global growth. We're not looking

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Speaker 1: for that right now. What do I want to pay

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Speaker 1: for a small company that has revenues up? That's a

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Speaker 1: big number, huge number. It's Microsoft, Okay, I mean I

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Speaker 1: get it. They're trading in a like John, you just

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Speaker 1: said they're fully valued, right, I didn't say that. But

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Speaker 1: but what am I going to pay for double digit

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Speaker 1: revenue growth? And the answer in this environment a lot, right.

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Speaker 1: And it's not even just the revenue growth number. It's

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Speaker 1: the consistency of the revenue growth, the stability and existent

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Speaker 1: the consistence and stability of revenue growth, the constant delivery.

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Speaker 1: You know, in a case like Microsoft, you have both

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Speaker 1: a you know, annuity like business with a growth business.

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Speaker 1: Excellent management. We got another three hours with it, right,

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Speaker 1: You've got more minute, so quickly here let's go physics. Here.

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Speaker 1: The market values a inertial force of good things. When

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Speaker 1: you're at the zero bound, when you've got potential g

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Speaker 1: d P under two. The value of that inertial force

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Speaker 1: of good companies it's it's like the it's like it's unbelievable.

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Speaker 1: And this is why I don't really buy into that

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Speaker 1: value supercyclical rotation to there's still a lot of uncertainty

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Speaker 1: out there, you know, around the US election, around the

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Speaker 1: schism between US and China, uh, the trade implications for

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Speaker 1: a lot of different companies and industries, and there's a

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Speaker 1: lot of other geopolitical risk. You take all of this

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Speaker 1: stuff together and you say, you, now, why would I

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Speaker 1: step away from these companies that are consistently delivering, whose products,

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Speaker 1: whose services, and whose management teams are best in class?

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Speaker 1: So you know, my view is that we have to

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Speaker 1: be thoughtful around valuation, but you can't let valuation lead

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Speaker 1: and when you're making a decision at this point in

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Speaker 1: the cycle, Okay, more great to say, you're fantastic to

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Speaker 1: have you with us in the studio. More of lank Rock.

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Speaker 1: We want to give you context and we can do

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Speaker 1: that from without question, the most emotional book on the

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Speaker 1: Euro I have ever seen. It was written five years ago.

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Speaker 1: His negotiations for the movie rights were so tenuous. We're

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Speaker 1: looking for the fall of the Euro. Memorial Day two

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Speaker 1: thousand twenty two, John but, a gentleman from Denmark, wrote

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Speaker 1: a piercingly passionate book on the euro and on reinventing

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Speaker 1: the Eurozone. In chapter by chapter, he went through, what

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Speaker 1: a god awful mess it was five years ago. This

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Speaker 1: is the perfect guy to talk to about dragging. Give

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Speaker 1: that for the book launch one I was party was

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Speaker 1: three people. You know, I just you know. I didn't

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Speaker 1: talk to him and I didn't get invite. He was

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Speaker 1: so large I couldn't even talk to him. Aout the party,

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Speaker 1: walked away from the moora set up his own shop,

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Speaker 1: just picked up three books and left data founder and

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Speaker 1: see how good morning to ends. Good morning. I don't

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Speaker 1: know quite what to say, but anyway, thanks for the intro.

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Speaker 1: And here's what I'll say, when's the next book? It

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Speaker 1: was so good? When's the next book? Writing a book

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Speaker 1: takes a little bit of time, so I have to

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Speaker 1: get approved for my wife before I'm allowed to write

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Speaker 1: a second one. Eight years he's up ends eleven president drunk,

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Speaker 1: he takes over the ECB. Eight years later he steps down.

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Speaker 1: What's his legacy? So um he everybody says he saved

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Speaker 1: the euro He did have a very important contribution to

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Speaker 1: ending the euro crisis. He had a very important contribution

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Speaker 1: to sort of breaking new ground for the e c B. Right,

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Speaker 1: we had the Mastric Treaty. It was supposed to be

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Speaker 1: not legal for the ECB to buy any government bonds,

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Speaker 1: and that he made it llegal essentially, not without it

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Speaker 1: didn't change the legal text, but the interpretation of the

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Speaker 1: legal text is totally different now. And I think if

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Speaker 1: we can think about in very concrete terms, like think

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Speaker 1: about Italy, over the last few years, we've had tremendous

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Speaker 1: political uncertainty. That was the main point in my book

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Speaker 1: that the next crisis was going to come from political uncertainty. Right,

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Speaker 1: and despite of that uncertainty, because there's such a belief

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Speaker 1: that the ECB is there to provide back stuff, we

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Speaker 1: had limited tension financial markets in Italy. We clearly had

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Speaker 1: big moves up and down on btbs, but it never

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Speaker 1: turned into like a financial crisis dynamic. And that's because

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Speaker 1: of the changes drug you have done. That's his legacy.

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Speaker 1: Trech Let the red redenomination genie out of the bottle.

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Speaker 1: Can we ever get it back in? So it all

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Speaker 1: comes down to whether there's public support for the Euro.

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Speaker 1: So if you go and look at opinion polls, it's

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Speaker 1: actually pretty striking that we have all this pessimist about

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Speaker 1: growth in the Eurozone, all the troubles that exist in

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Speaker 1: the EU with Brexit and so forth, and then you

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Speaker 1: ask people on the ground, do you want to keep

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Speaker 1: the Euro? In every single country support for the Euro

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Speaker 1: is high, and in many countries at a record high.

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Speaker 1: Obviously in Italy support is lower than other countries, but

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Speaker 1: support is going up again. So it is quite interesting,

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Speaker 1: giving all the pessimism that is out there, that the

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Speaker 1: Euro is kind of light. Part of your wonderful ability

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Speaker 1: here is to figure out the legacy of all these people.

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Speaker 1: You do this out of our house. Your academics in Denmark.

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Speaker 1: Drogg is m I t. Drog Is fundamentally is twisted

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Speaker 1: Anglo Saxon Field. Do they revert back to a Triche

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Speaker 1: Deuisenberg Old World ethos or is he permanently changed the

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Speaker 1: theoretical structure of historical Europe versus a more British or

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Speaker 1: more American economics. Well, I thank that is a big question.

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Speaker 1: And I think one of the reasons why we had

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Speaker 1: such a controversial decision at the last meeting was that

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Speaker 1: Dragon wanted to set the tone for the next four

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Speaker 1: years as well, and he has done so with the

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Speaker 1: four guidance, where they essentially say they're not gonna raise

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Speaker 1: interest rates until actual inflation, not just what the ECB

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Speaker 1: staff is forecasting, but actual inflation is getting to the target.

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Speaker 1: It's quite an extraordinary form of four guidance, Johnny, you

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Speaker 1: know I'll say this, and you know, maybe wrong, John,

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Speaker 1: But the most thunderous moment as headline the next number

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Speaker 1: of years was that single headline two years ago, we're

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Speaker 1: dragging began to put a timeline on we're not raising race.

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Speaker 1: Remember that he said, like, we're not raising race till

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Speaker 1: the summer of nineteen or whatever. He pushed the limits

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Speaker 1: of Monechy policy. And yes, I think the criticism will

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Speaker 1: be that an argument of his for quite a while

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Speaker 1: is that for rates to behind the future, they need

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Speaker 1: to be low. Now been negative for five years. And

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Speaker 1: I think the debate, even after he leaves the ECB

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Speaker 1: today will be whether any of this stuff actually works,

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Speaker 1: Has que work? Does negative rates actually work? Is he

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Speaker 1: taking it too far? Has he taken it too far?

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Speaker 1: The jury is still out, isn't it. So I think

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Speaker 1: there's two aspects of this that you need to separate.

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Speaker 1: So I think there's a financial stability argument. The Euros

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Speaker 1: song was incredibly vulnerable to financial crises before we learned

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Speaker 1: that the ECB was willing to buy sovereign bonds. That

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Speaker 1: part of legacy, I don't think you can doubt. The

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Speaker 1: other part of legacy pertains to inflation, and there it's

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Speaker 1: a much tougher thing to to to sell that. He

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Speaker 1: has been very successful. You can look at where core

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Speaker 1: inflation is now after essentially maxing out monetary policy, and

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Speaker 1: we're close to one percent. We should be close to

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Speaker 1: two percent, right, So I think he's been incredibly successful

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Speaker 1: in terms of reducing the risk of financial crisis. He

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Speaker 1: has not been particularly successful in terms of getting inflation

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Speaker 1: and inflation expectation up to the target. The way I've

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Speaker 1: told that story essentially is by saying the first half

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Speaker 1: of his tenure underlined the power of the ECB, the

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Speaker 1: second half highlighted its limitations. Let's push things on, President Leguard.

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Speaker 1: She's got a tough ask a lot of people, especially

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Speaker 1: on this side of the Atlantic, and I find it

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Speaker 1: really interesting. I don't know what your conversations have been

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Speaker 1: like with clients, he ends, but many people on this

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Speaker 1: side of the Atlantic seem to believe that a president

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Speaker 1: Leguard can get European politicians to do something that Mario

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Speaker 1: Dragon could not, and that's if you have the fiscal space,

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Speaker 1: use it. Yeah, I think there's this perception that she

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Speaker 1: was in charge of fiscal policy in France and therefore

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Speaker 1: she has some kind of magic power to make sure

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Speaker 1: the coordination between the central banks and the fiscal authorities

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Speaker 1: somehow gets much much better. I think it's a bit

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Speaker 1: more complicated than that. We're negative interest rates in your book,

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Speaker 1: they were not. They were not stunning. Yeah, that's just stunning.

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Speaker 1: It's hard to predict the future, isn't it. It's not

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Speaker 1: only the future, but it's hard to predict a complete

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Speaker 1: shattering of a theory. I mean, I don't know what

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Speaker 1: your econ one on one book was in Denver, but

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Speaker 1: in Denmark. But whether it's beg or it's it's it's

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Speaker 1: during bush fish or stars or whatever, man Q whatever

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Speaker 1: none of his folks were living is in those books?

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Speaker 1: Is it? Like? Um? Like? Even if you think about

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Speaker 1: debt sustainability, right, so you have this situation where you think, okay,

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Speaker 1: if you have no growth, eventually your debt dynamics will

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Speaker 1: run out of control. But if you have negative rights,

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Speaker 1: that's not obviously anymore either, right, So everything gets turned

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Speaker 1: on its head quickly. Space So there is something going

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Speaker 1: on in some European countries. There's something going on Holland,

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Speaker 1: there's something going on in France. What we're missing is

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Speaker 1: a big shift in Germany, and they have constitutional limits.

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Speaker 1: They need to find a different name for it. They

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Speaker 1: need to call it climb an investment and get around

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Speaker 1: the constitutional limits to get a big push going. That's

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Speaker 1: really sort of the hope at the end of the

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Speaker 1: tunnel is that we can find a new name for

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Speaker 1: fiscal stimulus that can get around those constraints. You're a

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Speaker 1: target one three right now, twelve months out come on tapes,

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Speaker 1: tapes recording. The key thing is global growth. If global

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Speaker 1: growth and can recover a little bit, the dollar will

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Speaker 1: be down and the euro will be meaningfully stronger. See

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Speaker 1: how he did that. That's very small. That's decades of work.

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Speaker 1: I didn't get a number. I didn't get a time.

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Speaker 1: So I think about it. When did we have peak

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Speaker 1: happy talk? Peak happy talk springen for global economy and

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Speaker 1: for global market spring right before now I'm talking about

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Speaker 1: global markets and global economy, the synchronized growth. In two,

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Speaker 1: you're a dollar peaked out. Stelling won forty as well.

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Speaker 1: So if things start to pick up. I didn't do

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Speaker 1: the exact math, but the drug ear is a sixteent appreciation.

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Speaker 1: In Europe, we've had a massive move success. At one

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Speaker 1: point they were fighting to get it down because it

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Speaker 1: was too strong. Remember that they were good times, weren't

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Speaker 1: the yins. When we're in and around one forty fighting,

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Speaker 1: you're still talking to him. He didn't give us a

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Speaker 1: number or a date. What I'm trying to get him now?

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Speaker 1: Please continue? We came from one thirty nine point seven

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Speaker 1: before the negative rates started, and obviously we traded below

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Speaker 1: one ten very recently, so it's a pretty meaningful move.

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Speaker 1: So he's still looking past. Can you get from T

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Speaker 1: minus one at the T plus one year? I still

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Speaker 1: want to forecast. I think in our global growth recovery scenario,

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Speaker 1: it's pretty easy to get the euro backup to watch one. Okay,

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Speaker 1: now we can move on, we can move forward. Yes, Nord,

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Speaker 1: there can't say enough about the fall of the year

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Speaker 1: right to do it for it per book. We can

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Speaker 1: talk about someone that used to over see the market

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Speaker 1: operations of the e c B. The man that in

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Speaker 1: this position would typically be executing the monetary policy. Really

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Speaker 1: pleased to say that. Francesco Pappadia joins us now former

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Speaker 1: ECB Director General of Market Operations, overseeing market ops through

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Speaker 1: to twelve at the ECB. Francesco, good morning, great to

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Speaker 1: have you with us on the program. Good morning to you.

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Speaker 1: A big focus at the moment on what the ECB

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Speaker 1: can and cannot buy and if they want to commit

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Speaker 1: to twenty billion a month, open ended, where will they

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Speaker 1: be looking. What are your thoughts on that at the moment, Francesco,

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Speaker 1: I think that the latest information we have on this

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Speaker 1: is that that they can go on for quite a while,

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Speaker 1: quite a while, goold mean one more year, um. They

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Speaker 1: would not a bump into the limits for the Germany,

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Speaker 1: which is of course the biggest, the biggest problem. So

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Speaker 1: they do have the time to revise the thirty a

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Speaker 1: limit if they would see the problem coming. There was

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Speaker 1: a big debate a couple of years ago about would

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Speaker 1: they go beyond corporate debt, would they start to buy equities?

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Speaker 1: And that's wrapped up again. Francesco, I imagine that when

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Speaker 1: you were at the ECB in twelve. When you're executing

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Speaker 1: the securities market program, did you ever think they'll be

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Speaker 1: buying corporate debt, corporate paper? Well, that was not so

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Speaker 1: far away, So I mean we had been buying something

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Speaker 1: similar to corporate debt, which is covered bonds. Cover bonds

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Speaker 1: are issued by banks, so they are a private kind

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Speaker 1: of paper, and we did We did that. When it

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Speaker 1: comes to new things, that they could buy more than equities,

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Speaker 1: which is a bit odd, I think, I mean, the

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Speaker 1: Japanese are doing it, but I think it would be

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Speaker 1: more likely that they would buy bank loans even without securitization.

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Speaker 1: Bank loans are already in the collateral pool of e

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Speaker 1: c B, and in a way, that's the only asset

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Speaker 1: which is in the collateral pool that is not bought outright,

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Speaker 1: So if I have to think of the new asset,

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Speaker 1: I think of the bank loans. Francisco, How controversial would

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Speaker 1: that be for the ECB to buy the loans of

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Speaker 1: banks that they also have to regulate. Well, I think

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Speaker 1: that that would be of an order of magnitude easier

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Speaker 1: than buying bank bonds, because if you buy bank bowns,

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Speaker 1: you buy the credit of the bank. If you buy

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Speaker 1: bank aloans, you buy the credit of the customer of

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Speaker 1: the bank, I mean, not to borrow it. So I

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Speaker 1: think it would be easier from from this point of

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Speaker 1: view because you don't buy the credit of the bank.

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Speaker 1: Francisco Papadia with us right now, folks, and we're just

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Speaker 1: thrilled it could be with us. All you need to

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Speaker 1: know with a seminal effort at the e c B

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Speaker 1: is Director General for Market Operations, Francisco. John and I

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Speaker 1: could talk to you for an hour this morning about

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Speaker 1: this linkage of Mr drog Mr Powell, Mr Carney into

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Speaker 1: a nascent question about trust in the very short term market,

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Speaker 1: just with a view from sixty feet. Every official John

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Speaker 1: and I have spoken to, including Lawrence Cudlo of the

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Speaker 1: White House and Bill Dudley, formerly with a New York Fed,

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Speaker 1: have said there's not a problem here. Is there a

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Speaker 1: problem brewing, brewing or existent in that very short term

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Speaker 1: overnight trust market. I don't see that as a pressing

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Speaker 1: problem quite frankly, um I see the main problem in

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Speaker 1: my view is that central banks are close to having

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Speaker 1: exhausted that their ammunition unless they invent something new, which

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Speaker 1: they could. But unless they do invent something new, the

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Speaker 1: unconventional measures, in my view, out closed to having finished

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Speaker 1: their their effect activeness. So I don't see a problem

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Speaker 1: of trust. Um, I see a problem of effectiveness if

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Speaker 1: you wish the vectors. If you take a log chart

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Speaker 1: where slope matters, folks, and you look at the build

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Speaker 1: out of the balance sheets of the different major central banks,

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Speaker 1: do you have confidence in the mathematics and calculation of

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Speaker 1: the appropriate level of assets at any given central bank? Well,

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Speaker 1: I think that the mathematics of this, as you say,

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Speaker 1: has changed a lot and keeps changing, because what used

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Speaker 1: to be normal in two thousand and seven two thousand

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Speaker 1: and eight is no longer normal, and there is no

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Speaker 1: prospect that we will get back to normal. And the

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Speaker 1: report story in the United States is very meaningful in

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Speaker 1: this and throwing a lot of information for all central

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Speaker 1: banks about the liquidity demand by by banks and these forces.

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Speaker 1: In a way to think again about this issue, Well,

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Speaker 1: it's almost and I say there's with great respect for

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Speaker 1: your public service, it's almost learned as you go. What

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Speaker 1: are you learning as you go from the data? John Can,

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Speaker 1: I say, day by day almost from the New York

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Speaker 1: Fed What are we learning with each of these auctions

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Speaker 1: and each of these processes well exactly that the we

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Speaker 1: have in the United States, and but that applies to

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Speaker 1: Europe and Japan as well. I mean the level of

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Speaker 1: reserves so that banks have with a central bank is

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Speaker 1: a large multiple, but very large multiple of what it

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Speaker 1: was before the crisis, and everybody thought that that was

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Speaker 1: quite enough to satisfy the demand of liquidity by banks.

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Speaker 1: I mean, what is happening in the ripple market. I've

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Speaker 1: seen that the FED came in with even larger operations

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Speaker 1: are just just today shows that we are not understanding

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Speaker 1: exactly what is determining the demand for liquidity by banks.

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Speaker 1: We have a view that the regulation has something to do,

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Speaker 1: uncertainty has something to do, but I don't think that

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Speaker 1: we have a full view. So what we are learning

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Speaker 1: is what is behind the liquidity demand of that Francesco,

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Speaker 1: just a final question from me to wrap up this interview.

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Speaker 1: You left the ECB shortly after President Dragon took over

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Speaker 1: the presidency of the European Central Bank. A final word

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Speaker 1: from you on his legacy. Well, I I I always

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Speaker 1: have stressed and that there is small continuity. Then people

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Speaker 1: think between different presidents. For instance, I think that the

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Speaker 1: difference between that drug entriche has been vastly exaggerated, and

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Speaker 1: I find confirmation of this in the fact that that

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Speaker 1: Driche recently came with a strong defense of a drug

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Speaker 1: drag CCP. So in thinking about the legacy of of

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Speaker 1: of drug, I think one should see that on a

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Speaker 1: line that in a way started with that Richette, that

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Speaker 1: was the first one to take unconventional measures and continuing

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Speaker 1: was developed by drugging more than any kind of rapture

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Speaker 1: between the two. Let me just add that after having

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Speaker 1: left the ECB, I'm now with Brugel as a senior fellows.

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Speaker 1: As you said, I'm so sorry did not mention that earlier,

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Speaker 1: and you can blame me for that. Francesco Francesco Papa

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Speaker 1: dea of Brugo and also formerly the ECB Director General

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Speaker 1: of Market Operations. Always great to get Francisco's thoughts. I

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Speaker 1: think the team has done a great job. Of this

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Speaker 1: team surveillance is give you some drugging perspective, the history

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Speaker 1: back that where we are now in the view forward.

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Speaker 1: We've had two wonderful guests and John, now we do

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Speaker 1: it again with someone steeped in the Germanic ECB history. Yeah,

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Speaker 1: the Austrian Central Bank experienced their experience at the ECB

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Speaker 1: on the board as well. I'm really pleased to say

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Speaker 1: that formerly of the e c B, Gertrude Trump our

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Speaker 1: googlele joins us now on the prone from Florence. Gertrude,

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Speaker 1: fantastic to have you with us. We've reflected on the

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Speaker 1: legacy of President Drug. Let's talk about the task ahead

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Speaker 1: for President Legard. What kind of e c B does

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Speaker 1: she inherit? I mean the ECB has in this first

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Speaker 1: twenty years um at East a lot um overcome the

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Speaker 1: financial crisis. I hope to recover the economy, but now

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Speaker 1: the challenges to find the right moment for for an exit.

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Speaker 1: At the moment the economy is slowing down, so therefore

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Speaker 1: it's it's too earlier about to talk about an exit.

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Speaker 1: But we bc that Mr Drug has achieved a lot

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Speaker 1: recently more easily. There was motibate about the right policy mix.

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Speaker 1: I think the ECB will have a debate about the

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Speaker 1: strategy the view of the surtity, and this is one

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Speaker 1: of the first task of Mrs Lagard. Gertrude, what are

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Speaker 1: the conditions that you would need to say that would

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Speaker 1: be sufficient enough to follow through with the next sit

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Speaker 1: The Japanese have talked about an exit for twenty years.

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Speaker 1: What would you need to see in the European economy

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Speaker 1: to actually see that materialize? I would say solid growth

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Speaker 1: rates UM, sufficient progress on UM, single markets, on banking

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Speaker 1: union UH, and also UM, let's a readiness of the

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Speaker 1: policy to contribute to solid economic growth. Gertrude, many people

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Speaker 1: disagreed with the latest round of QUI. In fact, maybe

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Speaker 1: the latest moves from President Drug his final act was

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Speaker 1: perhaps one of the most controversial acts within the government council.

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Speaker 1: Did you disagree with the latest round of QUEI? Is

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Speaker 1: that something you were against? Um? I'm no longer a

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Speaker 1: member of the guvern now I understand that, Gertrude. Of course,

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Speaker 1: fully I've introduced to formally off the e C baby

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Speaker 1: your thoughts as they currently stand. Is that a decision

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Speaker 1: that you disagree with? I mean you you need to

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Speaker 1: have the full picture when you take these decisions. I

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Speaker 1: think it is. It was very controversial to make an

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Speaker 1: additional UM, let's say rate cut. UM. I think it is. UM. Yeah,

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Speaker 1: it's important to think about the stabilization of up rage

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Speaker 1: and normalization of rage as soon as the as the

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Speaker 1: economic situation allows it. We are not yet there. It

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Speaker 1: will take time. But the negative consequences of of low

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Speaker 1: interest rates are visible in the economy. You see it

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Speaker 1: in the I would say, in there's asset prices. You

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Speaker 1: see it in the UH. Savings plens. So there is

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Speaker 1: um some fear and they in the in the public

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Speaker 1: also that the police is to lose. But I think

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Speaker 1: for the time being there is no possibility to change it.

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Speaker 1: But it's important to be aware of the negative side

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Speaker 1: effects of the acommodative policy. Dtr tumplgo girl, Thank you

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Speaker 1: so much for being with us today. Gertrude Than of

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Speaker 1: Austria on the former vice governor of the Austrian Central Bank,

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Speaker 1: and you hear there, John, something is somewhat unfamiliar to

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Speaker 1: American listeners. There's that Germanic that we associate with Axel Weber,

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Speaker 1: Akmark is sing with Temple Google. They have a decidedly

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Speaker 1: different view than many of the twenties seven yea. More recently,

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Speaker 1: the former governor of the Austrian Central Bank as well,

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Speaker 1: Governor Ivon Levoltney similar takes from him as well. He's

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Speaker 1: now left the Austrian Central Bank. But certainly that was

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Speaker 1: his for you two. Thanks for listening to the Bloomberg

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Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio